Global Financial Crisis

We are in the middle of what is most certainly the first and worst Global Financial Crisis, of that there is no doubt. In the 21st century the world is a much smaller place. Companies are truly on a global scale and as a consequence there is no longer safety in isolation from the world financial markets. The domestic market in most countries is too small to sustain growth, so because manufacturing costs and in the main wage costs are so much lower-- in the Far East for example--it is inevitable that companies look to set up and manufacture abroad to maximise profits. Is it possible to sustain growth forever? In my opinion the answer to this question is no. At some time or another markets will be saturated or consumers will not have the cash to keep the market place going. There are many reasons why this can come about. The current crisis is affecting all markets. In Europe and in particular the UK people have been living off credit for a decade or more. Irresponsible lending by major institutions has caused banks and mortgage providers to have unprecented potential for defaulters. British banks have compounded this by lending money to American banks who in turn have been irresposible in their lending criteria in particular the sub prime market. This domino effect sent ripples of unrest throughout the worlds markets and manufacturing output and other financial marker points have indicated recession in the US and in Europe. An accumulation of bad financial news has given in particular, small investors, the jitters on an unprecedented scale. The rush to sell shares has accelerated through September and into October. Large institutions have also got the jitters and they are selling shares in their droves, particularly those shares relating to banks and mortgage providers. Governments throughout the world have all made great strides to shore up their own individual banking systems by pumping billions of dollars into them. Is it all doom and gloom though? Markets are showing signs of recovery at the moment.

One of the mantras of making money in share investments has always been buy low and sell high. On that basis alone is it now the time to be taking the plunge? Can stocks go any lower than they are currently trading? The answer to this is yes of course they can. With markets being so volatile the slightest bit of extra bad news is enough to send individual shares tumbling. But in the medium to long term this is an ideal opportunity to get in. In particular Bank stocks have been hit hard, understandable given the circumstances. Investors in the UK have been scared off from the bank shares because one of the conditions imposed by the UK government is that no dividends can be paid to shareholders until the money pumped in has been returned to the government via future profits. Many people on fixed incomes particularly retired people rely on dividends from shares as a part of their income so obviously these small investors have looked to place their funds elsewhere.

From a personal point of view i believe the three major british banks that the Goverment has supported are a great investment opportunity in the medium to long term. All three major banks are trading shares at less than £2. The Royal Bank of Scotland is even trading shares at less than £1! Whether these shares go lower or not doesn`t really matter. They are currently trading at such a low level that profits are there to be had. If you are unsure about the Bank sector then look to the retail food sector as an investment vehicle. People always need food so in times of recession the major supermarket retailers can be a safe haven. Another sector to look at is the public transport sector. With money being tight and rising fuel costs continuing to bite, the overall cost of private motoring is spiralling upwards. People are not replacing their cars as often as they used to and are increasingly looking to use public transport so this sector will be looking to increase profits as a direct result. In times of recession there are always winners and losers. I hope this article has given you food for thought so you too can be one of the winners. Credit Crunch! What Credit Crunch? Take the plunge or head for the hills .what choice will you make? Another mantra to end on . "One man`s meat is another man`s poison!